As food prices finally fall, PM says economy has ‘turned a corner’

RISHI Sunak said yesterday that the economy had ‘turned a corner’ after food prices fell for the first time in two years.

The rate of inflation unexpectedly remained steady at 4 per cent in January, as higher energy prices balanced out the fall in the cost of staple food items.

The surprise result marks a win for the Prime Minister and Chancellor Jeremy Hunt ahead of the Budget and this year’s general election.

It also reignited hopes of an early interest rate cut, which would be a boost for borrowers.

The Consumer Price Index rate of inflation was 4 per cent in January, which is unchanged from December, according to the Office for National Statistics.

Gloomy forecasts had predicted that inflation would hit 4.2 per cent last month.

Food and soft drink prices fell by 0.4 per cent from December to January – the first monthly fall since September 2021. The price of coffee fell 3.6 per cent, biscuits and cakes by 2.6 per cent, butter by 1.2 per cent, cereals were down by 0.9 per cent and cheese by 0.8 per cent.

But food is still 25 per cent more expensive than two years ago, analysis of the ONS data revealed.

Mr Sunak said yesterday: ‘I’m absolutely determined to make the UK the best place in the world to start, to grow and to invest in businesses.

‘ Of course, we’re still battling with global headwinds, not least the Red Sea at the moment, but I absolutely believe that the economy has turned the corner and we’re now pointing in the right direction.’

Speaking at a meeting of business leaders, including the heads of Rolls-Royce and ITV, the Prime Minister added: ‘Everyone is predicting us to grow this year.

Mr Sunak said ‘because of all of that’, the Government had been able to start cutting taxes.

Fidelity International investment director Andrew Oxlade said the figures would give ‘some respite for households suffering under the cost of living crisis’. There was ‘much to cheer for consumers’ in the latest inflation data, PwC consumer markets leader Lisa Hooker added.

The falling cost of groceries was offset by an uptick in gas and electricity bills as the energy price cap was hiked in January.

Gas and electricity prices were 18 per cent lower than the peak in January last year, but they are still 89 per cent higher than three years ago.

However, the cap is expected to be cut in April, helping to bring inflation back down to the 2 per cent goal.

Mr Hunt said: ‘ Inflation never falls in a perfect straight line, but the plan is working; we have made huge progress in bringing inflation down from 11 per cent and the Bank

‘Pointing in the right direction’

‘We have made huge progress’

of England forecast that it will fall to around 2 per cent in a matter of months.’

Economists expect the Bank’s inflation target to be reached this spring, but the rate is forecast to rise again after that.

The Bank is under pressure to cut interest rates from a 16-year high of 5.25 per cent.

Hopes of a cut in spring or early summer were given a boost by the inflation data – after being dashed by stronger-than-expected wage growth figures yesterday.

Meanwhile, the ONS will reveal today if Britain’s economy contracted between October and December.

If it shrank, which would be the second consecutive quarter, it would mean the country officially fell into a recession last year.